Congratulations on having built a successful business. But how will you fully release the value of that business for the benefit of your family?
Succession planning sounds like the sort of thing you do when you are approaching 60 but in reality you should be thinking about this much earlier. It is as much about risk management as it is about ultimate retirement!
Succession planning is really about making yourself dispensable in your business or at the very least, reducing the reliance on you. If the future of your business is totally dependent on you, then its value may well be lost or substantially diminished if something unfortunate were to happen to you and your well-being. Effective succession planning must therefore include considering the unexpected as well as planned events.
Protect and release
Succession planning is about ensuring that the value of your business is protected and is capable of being released at some point. It will consider issues such as:
- Dependence on particular individuals (not just the business owner)
- Documented systems and procedures
- The quality of your customers, contracts and restraints on key employees
- What steps should be taken to prepare your business for sale?
- How are you developing your team?
- Can the business run without you now?
- How can you optimise the value of your business?
- Who are potential purchasers of the business?
- What role does insurance play in protecting your family?
- What would a due diligence investigation of your business reveal?
- Do you need to sell to achieve flexibility as you grow old or can the business be self sustaining?
Our view is that the best succession strategy is to ensure that the business is addressing all of the above issues now, not just when a potential purchaser appears or when you reach the point where you want to sell.
One of the things that we have found over the years is that cashing out the value of the business may not be the best financial decision and that with fewer and more discerning purchasers in the market, more and more businesses will continue with managers in control and owners being more passively involved.
We can assist in charting the right succession course for your business. It is never too soon to start this process.